Anyone who runs a business has first-hand experience when an employee's personal problems become work problems.
Unfortunately, it's human nature. When life isn't going so well in their personal life it tends to affect them whether they are on or off the clock. Whether it's marital problems, kids, health issues or loss of a family member, those situations often affect performance.
You most likely feel bad for your employee going through one of life's bumps in the road but at the same time you are still trying to run a business. When an employee is continuously late, day dreaming, slipping in performance or receiving excessing non-related work calls, what's the right way to handle it?
Two simple suggestions: hold an open conversation and be sympathetic.
For an otherwise good performer, one conversation will usually get them back on the right track. You need reassurance that their underperformance will not be long-term.
The conversation is somewhat like your typical performance discussion, with a little extra sympathy added. Review work expectations and give specific examples of where they are not being met. Then work together with the employee on a plan on how to get them back up to solid performance. Make sure to schedule that much-needed follow-up. If they rarely underperform, then make sure to sing their praises. Go into detail: "Todd, you have always done an amazing job, you're reliable, you're detailed….how can we work together to get you back on track…."
As the employer, think about where you can help and assist. No, I don't believe that employee's personal dealings are yours to take care of, but I do feel if there are options to make the situation better, you should. It could be offering them time off to take care of a few things, whether that is a few days or a few weeks or allowing time off during the day if they need counseling. If they are out of vacation time, offer it unpaid. Consider bending the rules or thinking outside the box for those employees you want to keep on your team.
For a side note, the rumor mill can be brutal. If someone is going through hard times it seems the whole organization knows. As the manager, make sure that you are stepping in to halt gossip, jokes or rumors. Keep all conversations with the employee private. Be patient, be sympathetic, and have a plan in place to get them on the right track.